Liberalization Boosts Growth in Open Myanmar

Myanmar’s growth accelerates as it rapidly emerges from extended isolation

Good progress made on macroeconomic policy priorities

Call for Myanmar to build institutional capacity with international support

In their regular report on the health of the Myanmar’s economy, IMF economists estimate that the country’s economy grew around 6½ percent in 2012/13, driven by gas production, construction, and services.

These drivers, along with further investment in telecommunication and transport, will continue to support economic activity, raising growth to 6¾ percent next year, says the report, which estimates that macroeconomic stability will be maintained with inflation contained at 6½ percent, and international reserves accumulating to 4 months of prospective imports.

But the IMF economists warn that the authorities’ limited macroeconomic management capacity is being stretched by the broad-based economic transition.

Inflationary pressures are also growing caused by wage increases, asset prices, and recent developments in the foreign exchange markets. On the upside, the economists note that growth could rise beyond their projection, if the pace of reforms were to exceed expectations.

Good progress on macroeconomic policy priorities

In late 2012, the IMF helped the authorities develop a macroeconomic reform program for 2013 that identified priority actions consistent with capacity constraints. The “Staff-Monitored Program” (SMP), which is being jointly monitored by the Government of Myanmar and IMF staff, is designed to maintain low inflation and increase international reserves to provide a buffer against shocks during the reform process. It also aims to build the institutional capacity and tools necessary for lasting macroeconomic stability.

The IMF economists praised the progress made by the authorities against their macroeconomic policy priorities, reflected in good progress against SMP benchmarks. All end-March quantitative targets were met by a comfortable margin, and the authorities also fulfilled their structural benchmarks, which were focused on exchange rate unification and the lifting of external payment restrictions.

Reforms to Reduce Poverty and Promote Broad-Based Growth

While progress made so far is impressive, the report cautions that a long road lies ahead to enable the authorities to achieve their overriding aim of reducing poverty and promoting broad-based growth. The IMF economists note that the comprehensive and...